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The spread between European aluminium billet and P1020 premiums has been narrowing sharply, falling below market estimates of billet conversion costs amid a rapid correction in billet premiums and recent support for duty-paid P1020
The spread between Fastmarkets’ aluminium 6063 extrusion billet premium, ddp North Germany, and P1020A duty-paid Rotterdam premium reached $276.25 per tonne on October 28, 2026, narrowing by $385 per tonne, or 58.2%, from its 2026 high of $661.25 per tonne on August 7.
By comparison, during the previous major contraction in 2021-23, the billet-P1020 spread narrowed by $901.25 per tonne, or 75%, to $300 per tonne on February 3, 2023, from an all-time high of $1,201.25 per tonne on December 10, 2021.
This marks a sharp shift from earlier in the year, when wider billet-ingot spreads supported stronger margins for extruders, with the subsequent decline in billet premiums reflecting increasingly bearish sentiment.
The spread is now below the estimated cost of converting ingot into billet with market participants seeing average conversion costs at around $300-350 per tonne, up from around $250 per tonne previously, amid higher energy costs this year.
Billet premiums respond rapidly to supply shock
The faster contraction in the billet-P1020 spread in 2026 has largely reflected the rapid response of both premiums to this year’s supply shock, particularly billet.
Fastmarkets assessed the North Germany billet premium at $1,175.00-1,250.00 per tonne on May 29, 2026, up by 109.1%, from $560.00-600.00 per tonne on February 27.
By comparison, the ddp Germany billet premium increased by 434.5%, to an all-time high of $1,500.00-1,600.00 per tonne on March 11, 2022, from $280.00-300.00 per tonne on October 2, 2020.
Although the overall increase was substantially larger in 2020-22, billet premiums rose at a faster rate in 2026.
The premium increased by an average of 1.20 percentage points per calendar day between February 27 and May 29, 2026, compared with 0.83 percentage points per day between October 2, 2020 and March 11, 2022.
Lower LME inventories accelerate supply response
Higher premiums prompted a similar supply response in both periods, attracting billet from a wider range of origins into Europe and encouraging increased domestic production, although in 2026 “the supply response is so much faster,” Fastmarkets principal analyst Andy Farida said.
Farida pointed to lower London Metal Exchange (LME) inventories as a key difference between the two periods.
“Back in 2022, there were inventories in the LME acting as a buffer, this time not so much,” he said.
LME aluminium inventories stood at 231,675 tonnes on October 29, 2026, compared with 913,200 tonnes on December 10, 2021.
Market participants also pointed to differences in demand between the two periods.
While the 2026 increase was predominantly supply-driven, the 2021-23 market also experienced stronger demand as Europe emerged from Covid restriction, helping to sustain elevated premiums for longer.
“In extrusion people were buying and buying forward because of concerns of long term availailability of metal,” a producer said.
Firming P1020 premium accelerates market convergence
In 2026 compared with 2020-2023 the spread has also narrowed more quickly because duty-paid P1020 premiums have firmed as billet premiums declined.
Uncertainty over US-Canada tariffs has added to existing tightness in the duty-paid market, with supply bottlenecks and limited replacement tonnes already supporting premiums.
Market participants said potential tariff changes could further restrict availability by incentivizing Canadian P1020 units to return to the US market.
Fastmarkets assessed the P1020A duty-paid Rotterdam premium at $560.00-595.00 per tonne on October 27, 2026. The premium had previously fallen by 19.8%, to $460.00-500.00 per tonne on August 21 from its 2026 high of $570.00-625.00 per tonne on May 15.
By comparison, during the previous period, the P1020 premium fell by 60.2%, to $230.00-260.00 per tonne on November 25, 2022, from an all-time high of $600.00-630.00 per tonne on May 20, 2022.
Could billet and P1020 premiums reach parity?
The recent recovery in P1020 premiums, alongside falling billet premiums, has accelerated the convergence between the two markets.
“It’s not outside the realms of possibility that we see a negative spread, but I would doubt it, maybe they go to parity. Billet might rebound about the time when P1020 comes off,” one trader said, citing that he sees it going to $550.
A second trader noted that the impact of the narrowing spread would vary between remelters and primary producers.
“The thing is that a primary producer won’t care as long as its at least $40-50 per tonne above primary prices,” they said.
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